Helena Rubinstein used guile, brilliant branding, and more than a few falsehoods to lift cosmetics from an accessory for prostitutes to a desired luxury item. Geoffrey Jones reveals her history.
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This study examines the "portability" of soft information within a decentralized financial institution. Using a unique dataset on loans from a large credit union and employees' notes summarizing their interactions with borrowers, the authors provide new insights on the portability of soft information within organizations, focusing in particular on an internal monitoring system used at this field site which, in effect, acts as a central repository of soft information gathered in the course of interactions between employees and customers. Contrary to the prevailing view that soft information lacks portability, results provide evidence that the "stock" of soft information accumulated in this system has persistent effects on the lending decisions of employees. Overall, findings indicate that the centralization of soft information acquired in past borrower-employee interactions can enable organizations to separate this informational asset from individual employees to facilitate future loan decisions. These results suggest that centralized information technology can alleviate the well-documented barriers of transmitting soft information consistent with economic theories on the role of centralization of information as a complement to decentralized decision-making. Key concepts include: Portability of information means the extent to which it can be stored for, communicated to, and used over time and by employees other than those that originally acquired or produced the information. Internal centralized information systems can facilitate the transmission of soft information across employees in different branches. Findings complement the literature on the role of information systems as a means of improving information processing and coordinating decentralized decision-making within financial institutions.
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Companies offering top-drawer customer service might have a nasty surprise awaiting them when a new competitor comes to town. Their best customers might be the first to defect. Research by Harvard Business School's Ryan W. Buell, Dennis Campbell, and Frances X. Frei. Key concepts include: Companies that offer high levels of customer service can't expect too much loyalty if a new competitor offers even better service. High-end businesses must avoid complacency and continue to proactively increase relative service levels when they're faced with even the potential threat of increased service competition. Even though high-end customers can be fickle, a company that sustains a superior service position in its local market can attract and retain customers who are more valuable over time. Firms rated lower in service quality are more or less immune from the high-end challenger.
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Micromanagers beware: Research of casino hosts by Harvard Business School's Dennis Campbell and Francisco de Asís Martinez-Jerez and Rice's Marc Epstein makes the case that hands-off management can work to improve employee learning and decision making.
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Companies that compete by offering a high level of service are particularly vulnerable to lose customers—even longtime customers—when competitive entrants offer increased service levels, according to new research in the retail banking industry by Ryan W. Buell, Dennis Campbell, and Frances X. Frei, all of Harvard Business School. The good news for providers of high-touch service is that if they can sustain the service advantage over time, they could be rewarded with higher value customers. Key concepts include: Incumbents offering high quality service attract and retain customers who are disproportionately service sensitive and systematically vulnerable to competitors offering superior service. It is the high quality incumbent's most valuable customers—those with the longest tenure, most products, and highest balances—who are the most vulnerable to superior service alternatives. Conversely, when the incumbent fails to maintain a high service position within the market, its customers are vulnerable to competitors offering inferior service but lower prices. Firms that make the strategic decision not to compete on service may not need to be concerned about the entry or expansion of competitors offering superior service. A long-run implication is that incumbents that can sustain a high level of service relative to local competitors will be able to attract and retain higher value customers over time.
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It's a challenge that all good managers face: How do you strike the right balance between encouraging autonomy among your employees and mitigating the risk that they'll make bad decisions? Using both field and quantitative data from the MGM-Mirage Group, this paper discusses how management controls affect the learning rates of lower-level employees. Research, focusing on hotel casino hosts, was conducted by Dennis Campbell and Francisco de Asís Martinez-Jerez of Harvard Business School and Marc Epstein of Rice University. Key concepts include: Tightly monitored employees were less likely to make independent decisions, even if their job descriptions allowed them to do so. They were even less likely to adjust their decisions to account for information they could easily show to their superiors to justify those decisions. The lower frequency of experimentation in their decision-making leaves employees in tightly monitored environments with few opportunities to learn. The researchers question whether employees in these micromanaged environments made up for the lack of experimentation by paying more attention to and learning more from each experiment. The researchers found strong learning effects among employees in settings where they were monitored by their bosses somewhat loosely. In settings where they were more tightly monitored, employees learned very little.
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One of the most powerful tools that an organization has to achieve its goals is the ability to hire employees with complementary values and capabilities. Reviewing personnel and lending data from a financial services organization undergoing a major decentralization process, Dennis Campbell offers the first direct empirical evidence establishing a link between employee selection and better alignment with organizational performance goals. Key concepts include: Employee selection as an important, but understudied, element of organizational control systems. The research provides the first direct empirical evidence of a link between employee selection and better management control outcomes. Employees chosen by the organization to function well in a decentralized environment were more likely to use decision-making authority in the granting and structuring of consumer loans than those who were not, and made less risky choices. The results provide evidence of longstanding models of management control, which posit that control on organizations can be obtained by managing "inputs" (e.g. employee selection) rather than "outputs" (e.g., explicit incentive contracting on financial performance).
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Owners operating outlets across multiple markets have a variety of organizational models to choose from, including franchising. The decision is one of the most important they will make. A new Harvard Business School study looks at how 420 convenience store chains organized to serve diverse customers. Key concepts include: Even firms that have a standardized business face the challenge of serving customers with different preferences and behaviors when that model is stretched across multiple markets. By choosing to franchise, the firm minimizes exposure to risk in a relatively unfamiliar market; as a tradeoff, it also gives up some measure of control. Chains that don't franchise employ fewer corporate and supervisory staff relative to the number of store-level employees. Early evidence from ongoing research indicates that unit sales are lower for firms that expand into multiple markets without franchising or providing some incentive system for local managers.
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To what extent do balanced scorecards provide useful information for testing and validating an organization's strategy? Numerous case studies of balanced scorecard implementations document their use in translating organizational strategies to objectives and measures, communicating strategic objectives to employees, evaluating the performance of business units, and aligning the incentives of employees across business units and functions. There has been comparatively little research, however, on the potential learning and feedback role of balanced scorecards. Analyzing balanced scorecard data from Store24—a privately held convenience store retailer in New England—during the implementation of an innovative but ultimately unsuccessful strategy, this study investigates whether, when, and how information about problems with the firm's strategy was captured in the multiple performance measures of its balanced scorecard. Key concepts include: Store24's balanced scorecard contained useful and timely information for detecting problems in its strategy. The results also suggest that Store24 executives eventually learned about problems with the strategy despite a lack of reliance on such formal analysis. Analysis of the balanced scorecard could have yielded more timely information as well as more detail on why the strategy was not working as planned. Multiple measures in a balanced scorecard might systematically be used to test how well different drivers of performance are working to achieve strategic objectives and superior financial performance.
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Chain organizations operate units that are typically dispersed across different types of markets, and thus serve significantly different customer bases. Such "market-type dispersion" is likely to compromise the headquarters' ability to control its stores for two reasons: Relative differences in local conditions make it difficult to monitor a store manager's behavior, and a chain with wide-ranging customer bases will have a harder time serving its customers and will need to rely more heavily on store managers' ability to adapt to local needs. This study identifies market-type dispersion as a factor that is systematically related to firms' organizational design choices. The results may help managers and consultants who deal with control challenges related to a chain's geographic expansion into different markets. Key concepts include: Chains experiencing higher levels of variation in customer demands across different locations are more likely to increase delegation and the provision of incentives through the organizational design choice of franchising. Stores are more likely to be franchised when their location characteristics are more divergent from the most prevalent location characteristics of the chain as a whole. Non-franchisor chains with higher levels of such market-type dispersion tend to decentralize operations to a greater extent. It is also possible that they provide higher variable pay.
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